On October 7th, the latest data from the State Administration of Foreign Exchange (SAFE) showed that as of the end of September this year, China's foreign exchange reserves stood at $3.316 trillion, remaining stable above $3.2 trillion for 10 consecutive months. The gold reserves have remained unchanged for five consecutive months.

Foreign reserves increased by $28.2 billion in September

The data indicated that as of the end of September 2024, China's foreign exchange reserves were $3.316 trillion, an increase of $28.2 billion from the end of August, representing a rise of 0.86%.

The State Administration of Foreign Exchange stated that in September 2024, influenced by factors such as the monetary policies and expectations of central banks of major economies, as well as macroeconomic data, the US Dollar Index fell, and global financial asset prices generally rose. The comprehensive effect of exchange rate conversion and changes in asset prices led to an increase in the foreign exchange reserves for the month. The overall stable operation of China's economy, with steady progress and strong resilience and potential, has not changed, and these favorable conditions will continue to support the basic stability of the scale of foreign exchange reserves.

Advertisement

Wen Bin, Chief Economist at Minsheng Bank, stated that in September 2024, the Federal Reserve cut interest rates for the first time since 2020, lowering the target range for the federal funds rate by 50 basis points, which exceeded market expectations. At the same time, the Bank of Japan and the European Central Bank maintained their policy interest rates unchanged, narrowing the interest rate differentials between the United States and other major developed countries, which led to a weaker US Dollar Index and a general rise in global asset prices.

In terms of exchange rates, the US Dollar Index fell by 0.9% to 100.8, with major non-US currencies all appreciating, with the Japanese Yen, Euro, and British Pound appreciating against the US Dollar by 1.8%, 0.8%, and 1.9%, respectively. Regarding bond prices, the yield on 10-year US Treasuries decreased by 10 basis points month-on-month to 3.81%, and the yield on 10-year Japanese government bonds decreased by 3 basis points month-on-month to 0.89%. In terms of stock prices, the S&P 500 stock index rose by 2.0% month-on-month, the EURO STOXX 50 price index fell by 2.2% month-on-month, and the Nikkei index fell by 1.9% month-on-month. Affected by exchange rate conversion and changes in asset prices, by the end of September, foreign exchange reserves increased by $28.2 billion from the end of August to $3.316 trillion, a rise of 0.86%.

Wen Bin believes that China's export situation is steadily improving, with the competitiveness of foreign trade "new three items," ships, and other products becoming increasingly strong. New forms of foreign trade such as cross-border e-commerce, market procurement, and overseas warehouses continue to emerge, and trade partnerships with countries along the "Belt and Road" are becoming increasingly close. Exports maintain medium to high-speed growth and continue to play a fundamental role in stabilizing cross-border capital flows. At the same time, with the introduction of a package of policies exceeding expectations in currency, real estate, and capital markets, market confidence has been significantly boosted, and international investors are accelerating their布局 of Chinese assets, which also provides strong support for the stability of the scale of foreign exchange reserves. Currently, the Chinese Yuan exchange rate is stable with a slight appreciation, and banks' foreign exchange settlement and sales have turned into a surplus, and the foreign exchange market will continue to operate smoothly. The above factors will all support the basic stability of China's foreign exchange reserve scale.

Pause in gold purchases for five consecutive months

The data showed that gold reserves reported 72.8 million ounces at the end of September, unchanged from the previous month. Since then, the central bank has paused its gold purchases for five consecutive months.

In May of this year, China's central bank ended its "eighteen consecutive increases" in gold reserves, and since then, gold reserves have been maintained at the level of 72.8 million ounces.Zhao Qingming, the deputy director of the Huiguan Research Institute, believes that although China's gold reserves are insufficient in both absolute and relative terms, there is still a need to optimize the structure of official reserve assets by increasing holdings. However, given that gold prices have continued to rise this year and set a new historical high in September, they are currently in a state of severe overvaluation. Against this backdrop, increasing gold holdings not only incurs excessively high costs but may also further push up gold prices.

"The continued suspension of gold purchases by our country's central bank is a rational choice and demonstrates a responsible attitude towards the international gold market," said Zhao Qingming.

Although gold prices have fallen every September since 2017, this September clearly broke the "September curse." COMEX gold and London spot gold prices once broke through $2,700/ounce and $2,680/ounce, respectively, setting new historical highs; the increases in September were 5.1% and 5.24%, respectively.

Since October, international gold prices have fluctuated and adjusted downward. As of the time of writing, COMEX gold was reported at $2,666.2/ounce, down 0.06%; London spot gold was reported at $2,646.205/ounce, down 0.27%.

Looking ahead, many institutions maintain a bullish outlook on gold prices. For example, Goldman Sachs recently raised its gold price forecast for early 2025 from $2,700/ounce to $2,900/ounce. Bank of America expects gold prices to reach $3,000 per ounce next year.

In its latest research report, Fu Energy Futures pointed out that against the backdrop of the Federal Reserve's interest rate cut cycle, uncertainty surrounding the U.S. election, and the escalation of geopolitical tensions in the Middle East, it is expected that gold prices will fluctuate in a stronger range.